Glendale Brands Company uses standard costs for its manufacturing division. Standards specify 0.1 direct labor hours per unit of product. At the beginning of the year, the static budget for variable overhead costs included the following dа ta: Production volume 6,100 units Budgeted variable overhead costs $13,500 Budgeted direct labor hours (DLHr) 610 hours At the end of the year, actual data were as follows: Production volume 4,100 units Actual variable overhead costs $15,100 Actual direct labor hours (DLHr) 480 hours What is the variable overhead efficiency variance?

variable overhead efficiency variance = $154.7 unfavorable

Explanation:

Giving the following information:

Production volume of 6,100 units

Budgeted variable overhead costs $13,500

Budgeted direct labor hours (DLHr) 610 hours

Actual:

Production volume of 4,100 units

Actual variable overhead costs $15,100

Actual direct labor hours (DLHr) 480 hours

First, we need to calculate the predetermined manufacturing overhead rate:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 13,500/6,100 = $2.21 per hour

Now, by using the following formula we can calculate the variable overhead efficiency variance:

variable overhead efficiency variance = (Standard Quantity - Actual Q) * Standard Rate

variable overhead efficiency variance = (0.1*4,100 - 480) * 2.21 = 154.7 unfavorable